New Delhi, March 25 (IANS): The government Wednesday approved the formation of a special purpose vehicle (SPV) to provide efficient rail systems to major ports to enhance cargo handling capacity.

The decision was taken by the union cabinet which met here with Prime Minister Narendra Modi in chair.

According to the cabinet, the SPV would fullfill purposes like enhancing the last-mile connectivity to major ports, modernisation of evacuation infrastructure at ports, to operate and manage internal port railway system, and to raise financial resources for funding port related railway projects.

The cabinet said the major ports have identified a shelf of nearly 40 projects which includes the last-mile connectivity projects and internal port rail projects. This would require an investment of Rs.2,372 crore.

"The SPV would be funded by all the 12 major ports and the Rail Vikas Nigam Limited (RVNL). Major Ports would contribute 90 percent of the equity with RVNL contributing the rest," the cabinet said in a statement.

The cabinet said that the new SPV would work in close coordination with the Indian Railways and leverage the existing participative model of the Indian Railways for enhancing last-mile connectivity to ports.

"The work of the SPV is expected to result in substantial reduction in dwell time of cargo at ports and bring down the overall logistic cost for trade," the statement said.

The statement said that the SPV would be registered as a company under the Companies Act with an initial authorised capital of Rs.500 crore with an initial subscribed share capital of Rs.100 crore.

"It is also proposed to raise resources from multilateral funding agencies and other financial institutions to finance port connectivity projects," the cabinet statement added.